Pune: As India Inc awaits the third quarter results with baited breath, industry insiders say that despite doing much better than most big economies, manufacturers will have to change their business strategies in 2009.
"Those who want to party hard must not complain about hangover." That's how Bharat Phatak, director at Sajag Securities, explains the need to be ready for major readjustments across all industrial sectors in the coming year.
"The stock markets, known as the barometer of a country's economy, have seen both, a historical rise and a historical fall in this year. Now, the time has come to look inwards and identify opportunities that will offer limited, but assured returns," Phatak said. Agreeing with Phatak, chartered accountant Shivajirao Zavare said, "In 2009 the investments will hopefully be in such areas that offer sustainable, though not very high returns."
Advising manufacturers to look for newer export pastures, Ravi Pandit, chairman of KPIT Cummins Limited and a former president of the Mahratta Chamber of Commerce Industry and Agriculture, said that the damage is deeper than we think it is as the recession has changed the entire paradigm for the industries, especially those dependent heavily on the United States as their export market. "The manufacturers here will have to seek newer markets in 2009 as destinations for their exports," he added.
"Also important will be the shift in the entire value proposition the Indian businesses are offering. From the run-of-the-mill projects coming to the Indian information technology sector, the move will be towards value addition and cutting edge work such as embedded software that will help Indian companies move up the value chain," Pandit predicted.
Though several auto majors in the city are currently announcing block closures and all are waiting with their fingers crossed for third quarter corporate results, which will define if the current econimic situation is a recession or just a slow growth period, there are sectors to look forward in 2009.
"Pune has the engineering and technological capability to meet the challenge, as the overall 2008 story has demonstrated. Global major such as Volkswagen and General Motors have put Pune on their global business map and are expecting to make the city a major part of their business strategy," Pandit said.
Also, there are some industries that are not entirely dependant on the automotive sector. This has helped them tide over the situation by shifting the focus to other sectors.
Said Arvind Mehta, president of Plasti India Foundation, "Only about 15 per cent of the country's plastics industry's production is for automotives . Other areas, such as packaging, agriculture, fertilisers and chemicals or food and retail are progressing steadily. We are in fact expecting a rise of about 15 per cent in the country's plastics business and an equal rise in exports," Mehta said.
Venture capital investments will probably fall this year for the first time since 2003 as the financial crisis has crippled the markets for acquisitions and initial public offerings. "US start-up funding may drop in the third quarter," said Tracy Lefteroff, a managing partner at PricewaterhouseCoopers LLP, which does consulting work for venture capital firms. Turmoil in the credit markets is making it more difficult for young companies to raise money as venture capital firms are concentrating on existing investments instead of making new ones, he pointed out.
MindTree Consulting chairman and managing director Ashok Soota observed that clearly 2008 has been the year of the black swan. The following quarters in 2009 can be even worse, but like in the past, this crisis will also pass.
Though 2008 was a witness to global recession, weakening of the dollar, tightening of the contracts, cost cutting, jobs cuts among others, "India has emerged a winner of sorts as the economy was still strong enough and the industry has been growing," he said.
While the IT industry is expected to maintain the double digit growth in 2009 too, he said another clear winner was the telecom industry which has kept the momentum on by adding 27.87 million subscribers during June-September this year and registering a growth of 8.6 per cent on a quarter-on-quarter basis.
Soota said in hard times, traditional wisdom of prudence always works. "Corporates should conserve cash, assuming that the downturn will be even longer than forecasted. Enterprises should take a close look at wastage in your system, focus on utilisation and overall operational efficiency."
THE 2008 STORY
t General Motors makes operational its Talegaon plant that has a capacity to make 140,000 cars every year. The company says its operations are not affected by the problems faced by the US-based parent t Volkswagen decides it will advance the roll out of cars from Pune plant from 2010 to late 2009 t Pune emerges as the city with seventh highest potential to become a global IT hub t Recession hits. Job losses, shutdowns and block closures of plants become talk of the town
Source: The Times of India